The Six Stages of Boom, Bust, and Recovery

The advent of boom and bust business cycles is certainly not a new phenomenon.  Economic expansions and contractions have been commonplace throughout human history.  The thing that made the recent economic downturn so painful is the fact that it followed successive decades of “fine-tuning” the economy by government and quasi-government institutions that skewed incentives and systematically diverted economic resources away from their optimal use.  When this artificial stability (necessarily) collapsed, the result was a much more intense adjustment than most people had anticipated.

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